Morning Euro Markets Bulletin.

ADVFN III Morning Euro Markets Bulletin

Daily world financial news Monday, 07 October 2013

London Market Report

FTSE 100 Euronext Dax perf CAC 40 Please click on the images to view our interactive charts

M&S, Burberry lead FTSE 100 lower as US shutdown persists An ongoing government shutdown Stateside continued to weigh on market sentiment on Monday with London's FTSE 100 registering losses in morning trade. US lawmakers failed to reach an agreement on either the budget or the debt-ceiling over the weekend, heightening fears that the US could run out of the money it needs to pay its debts later this month. The US Treasury could forestall a "technical default" easily enough even past the October 17th deadline, some analysts seem to be suggesting on Monday morning, but only by re-prioritising expenditures, which would result in a further significant fiscal drag. House Speaker John Boehner has rejected the proposal to raise the debt limit without setting preconditions, sparking falls across equity markets over Europe this morning. The Treasury has already said that it will exhaust measures to avoid going over the borrowing limit by October 17th. While Boehner and the Republicans continue to demand changes to President Barack Obama's flagship health-care bill, the Affordable Care Act, Obama has reiterated that he will not negotiate and has said that Congress should not use the budget and debt ceiling issues as leverage. Financial Trader David White from Spreadex said that "risk assets are likely to keep hurting the longer this goes on, perhaps presenting an opportunity to those who doubt the reality of a US default." "The FTSE 100 struggles to hold 6,400 as traders look to rebalance against downside risk this morning. A lot of what has performed strongly over the past three months within the index is experiencing an element of mean reversion, allowing investors a chance to participate at lower prices. But the feeling at present is one of nerves, making putting money to work easier said than done." FTSE 100: M&S weakens after broker comments High Street department store Marks & Spencer was trading in the red after Credit Suisse retained its 'underperform' rating, saying that full-year forecasts "look demanding" after a weak first-half. The bank said the shares - trading at a 20% premium to the long-term average - look "overbought" after a 30% rise so far this year. Shares in British luxury brand Burberry were also under heavy selling pressure this morning after its Chief Executive Officer Angela Ahrendts told French newspaper Les Echos that the slowdown in China may be more than temporary. Power systems group Rolls-Royce was among the few stocks making gains this morning after receiving an order from Japan Airlines to deliver its Trent XWB engines for a new fleet of 31 Airbus A350s. Rolls-Royce also announced that it was awarded two contracts worth a combined $496m to support T56 engines for US government aircraft. Smirnoff and Captain Morgan owner Diageo was lower after Citigroup said it expects a "soft quarter" for the spirits industry across the board. Nevertheless, the bank kept its 'buy' rating saying that growth should improve in the coming quarters and the company is the best positioned in the emerging markets for the long term. Part-nationalised banking groups Lloyds and RBS were heavy fallers this morning along with Barclays, HSBC and Standard Chartered. FTSE 250: Cranswick falls after first-half update UK food producer Cranswick fell despite a 15% increase in total sales in the first half, as it warned that pig prices reached a record high during the period. The firm said that the extent of and time-lag involved in recovering these higher input costs, along with the start-up costs of its pastry business, will mean that first-half operating profits will be flat year-on-year. Petra Diamonds rose after saying it remains on track to meet its production guidance of three million carats of diamonds for fiscal year 2014 following a strong production rate in the fiscal first quarter. Ladbrokes was lower after Bank of America Merrill Lynch cut its rating on the bookmaker to 'neutral' and trimmed its target from 235p to 175p.

UK Event Calendar

FTSE 100 - Risers Fresnillo (FRES) 931.00p +1.92% William Hill (WMH) 413.40p +1.37% Rolls-Royce Holdings (RR.) 1,121.00p +0.54% Mondi (MNDI) 1,064.00p +0.28% FTSE 100 - Fallers Marks & Spencer Group (MKS) 481.60p -2.51% Burberry Group (BRBY) 1,600.00p -1.72% Anglo American (AAL) 1,465.50p -1.71% Lloyds Banking Group (LLOY) 73.67p -1.66% Weir Group (WEIR) 2,238.00p -1.58% Rio Tinto (RIO) 2,968.50p -1.38% Persimmon (PSN) 1,063.00p -1.30% CRH (CRH) 1,464.00p -1.28% Croda International (CRDA) 2,643.00p -1.27% easyJet (EZJ) 1,281.00p -1.23% FTSE 250 - Risers Petra Diamonds Ltd.(DI) (PDL) 118.90p +2.15% UDG Healthcare Public Limited Company (UDG) 330.00p +1.85% UK Commercial Property Trust (UKCM) 75.25p +1.69% Kazakhmys (KAZ) 254.90p +1.55% Ted Baker (TED) 1,858.00p +1.20% Grainger (GRI) 176.50p +1.15% Telecom Plus (TEP) 1,256.00p +1.13% NMC Health (NMC) 330.00p +1.07% Ophir Energy (OPHR) 315.10p +1.03% Daejan Holdings (DJAN) 3,936.00p +1.03% FTSE 250 - Fallers Cranswick (CWK) 1,100.00p -4.01% Serco Group (SRP) 511.00p -3.31% Imagination Technologies Group (IMG) 289.60p -3.27% Galliford Try (GFRD) 1,030.00p -2.28% Synergy Health (SYR) 1,043.00p -2.16% esure Group (ESUR) 231.50p -2.11% PayPoint (PAY) 1,026.00p -2.10% Taylor Wimpey (TW.) 98.00p -2.10% Victrex (VCT) 1,540.00p -1.91% Essentra (ESNT) 729.00p -1.88%

UK Event Calendar

INTERIM DIVIDEND PAYMENT DATE Capita, Hikma Pharmaceuticals, Tex Holdings, Vesuvius INTERNATIONAL ECONOMIC ANNOUNCEMENTS Consumer Credit (US) (20:00) GDP (2nd release) (EU) (10:00) Harmonised Competitiveness Indicators (EU) (09:00) FINALS Waterman Group ANNUAL REPORT Angle, Animalcare Group SPECIAL DIVIDEND PAYMENT DATE Hikma Pharmaceuticals EGMS Naibu Global International Company AGMS City of London Investment Group, Mid Wynd International Inv Trust TRADING ANNOUNCEMENTS Carclo FINAL DIVIDEND PAYMENT DATE Pinewood Shepperton

Europe Market Report

FTSE 100 Euronext Dax perf CAC 40

Europe open: Stocks slide as US government shutdown continues FTSE 100: -0.79% DAX: -1.20% CAC 40: -1.30% FTSE MIB: -0.17% IBEX 35: -0.81% Stoxx 600: -0.91% European equities were seeing red as the US government entered its second week of a shutdown with no end in sight. Planned talks between the US and European Union about a free trade agreement have been cancelled and US data has been postponed due to the shutdown.  "We believe the debt ceiling will be raised in time and the path of US rates will likely be higher," according to Barclays Capital analyst Jodie Gray. "Furthermore, even if the debt ceiling is not raised in time we believe that concerns about missed debt payment are overstated (the Treasury is scheduled to pay $6bn on October 31 and $31bn on Nov 15) and we recommend going long 2y Treasuries versus OIS (overnight index swap rate)." Merkel may join forces with Greens, says aide German Chancellor Angela Merkel's Christian Democratic Union (CDI) party could form a coalition with the Green party, a source told Bloomberg. A top aide to Merkel said a partnership between the two parties was realistic, possibly adding pressure on the opposition Social Democrats. The CDU and the Bavarian Christian Socialists will hold talks with the leadership of the Greens on October 10th. It comes after Merkel failed to score enough votes to win the September 22nd parliamentary elections. Burberry, EADS Burberry Group declined after the luxury-goods maker's Chief Executive Officer Angela Ahrendts said a slowdown in Chinese sales may extend. European Aeronautic Defence & Space Co. advanced after its subsidiary Airbus SAS won its first order from Japan Airlines Co. Solvay rose after saying it will buy US chemicals maker Chemlogics Group for $1.35bn. Singapore´s sovereign wealth fund Temasek and Chinese outfit Sinopec are reportedly interested in acquiring a 25% stake in Gas Natural Fenosa, Spanish business daily Expansión reports. Brent crude slides Brent crude futures fell $0.959 to $108.420 per barrel on the ICE. The euro strengthened 0.11% to the 1.3573 US dollar.

US Market Report

Stocks rise in absence of data as shutdown persists Dow Jones: 0.51% Nasdaq: 0.89% S&P 500: 0.71% US stocks finished with decent gains on Friday despite the ongoing government shutdown as bargain hunters stepped in following a choppy few days for global financial markets. Nevertheless, the Dow and S&P 500 indices still finished lower for the week as politicians continue to wrangle over the budget and the crucial debt ceiling. The tech-heavy Nasdaq however posted its fifth straight week of gains. "Our best guess is that a comprehensive agreement will be reached sometime close to the 17th October debt-ceiling deadline," said Analyst Jessica Hinds from Capital Economics. "That would mean at least another week of uncertainty, which will probably keep the US equity market on the back foot." With the partial shutdown of the US government extending into its fourth day, the all-important employment report scheduled for Friday was delayed until departments reopen. Market Analyst Craig Erlam from Alpari said that this "surely takes the 'Octaper' off the table". Budget talks continue Markets are hoping that Congress will agree to raise the $16.7tn debt limit by the deadline to prevent the US government defaulting on its obligations, something that the Treasury Department said could have a “catastrophic effect” on all aspects of the US economy. It said in a report on Thursday that a default could lead to “events of the magnitude of late 2008 or worse”. Meanwhile, International Monetary Fund Managing Director Christine Lagarde said failure to raise the debt ceiling would do damage to the global economy: “The government shutdown is bad enough, but failure to raise the debt ceiling would be far worse, and could very seriously damage not only the US economy, but the entire global economy." Comments from House Speaker John Boehner continue to be in focus after he said he would not allow a default and would consider using a combination of Republican and Democratic votes to lift the debt ceiling if needed. Speaking today he called for both sides to "sit down" and negotiate, saying "this isn't some damn game". "I don't believe we should default on our debt [...] If we are going to raise the amount of money we can borrow, we ought to do something about our spending problem and lack of economic growth." Facebook jumps on Instagram ad plan Facebook jumped after the social network said it would sell advertising on its Instagram photo service. ”Seeing photos and videos from brands you don’t follow will be new, so we’ll start slow," the company said in a blog post. Union Pacific Corp. slumped after the railroad operator’s earnings forecast missed analysts’ projections. Electric car maker Tesla Motors rebounded following some recent heavy falls after a fire in one of the it vehicles raised questions about safety. Dental supplies manufacturer Dentsply International gained after Bank of America upgraded its rating on the stock to 'buy'. S&P 500 - Risers Juniper Networks Inc. (JNPR) $20.85 +3.58% F5 Networks Inc. (FFIV) $91.54 +3.49% Aetna Inc. (AET) $66.44 +3.44% Dow Chemical Co. (DOW) $39.99 +3.15% Celgene Corp. (CELG) $157.27 +3.05% Constellation Brands Inc. Class A (STZ) $61.97 +3.03% Yahoo! Inc. (YHOO) $34.89 +3.00% IntercontinentalExchange Inc. (ICE) $193.65 +2.99% Dentsply International Inc. (XRAY) $44.49 +2.94% Allstate Corp. (ALL) $52.35 +2.87% S&P 500 - Fallers J.C. Penney Co. Inc. (JCP) $7.86 -6.54% Lennar Corp. Class A (LEN) $34.69 -2.88% D. R. Horton Inc. (DHI) $18.54 -2.78% HCP Inc. (HCP) $39.05 -1.93% PulteGroup Inc. (PHM) $16.20 -1.82% Avon Products Inc. (AVP) $20.21 -1.46% Clorox Co. (CLX) $81.57 -1.35% Lorillard Inc. (LO) $44.93 -1.19% Quest Diagnostics (DGX) $61.80 -1.12% Macerich Co (MAC) $55.68 -1.08% Dow Jones I.A - Risers Walt Disney Co. (DIS) $65.30 +2.00% Boeing Co. (BA) $117.20 +1.70% Hewlett-Packard Co. (HPQ) $21.26 +1.63% E.I. du Pont de Nemours and Co. (DD) $58.65 +1.54% JP Morgan Chase & Co. (JPM) $52.67 +1.41% Alcoa Inc. (AA) $7.96 +1.27% Exxon Mobil Corp. (XOM) $86.32 +0.96% Intel Corp. (INTC) $22.81 +0.93% Johnson & Johnson (JNJ) $87.31 +0.84% Pfizer Inc. (PFE) $29.00 +0.80% Dow Jones I.A - Fallers Wal-Mart Stores Inc. (WMT) $72.80 -0.49% Merck & Co. Inc. (MRK) $48.23 -0.27% General Electric Co. (GE) $24.05 -0.21% Home Depot Inc. (HD) $75.78 -0.13% Chevron Corp. (CVX) $118.13 -0.10% Nasdaq 100 - Risers Catamaran Corp (CTRX) $46.85 +4.46% Tesla Motors Inc (TSLA) $180.98 +4.43% Facebook Inc. (FB) $51.04 +3.78% F5 Networks Inc. (FFIV) $91.54 +3.49% Celgene Corp. (CELG) $157.27 +3.05% Yahoo! Inc. (YHOO) $34.89 +3.00% Dentsply International Inc. (XRAY) $44.49 +2.94% Biogen Idec Inc. (BIIB) $240.30 +2.76% Micron Technology Inc. (MU) $18.47 +2.53% Symantec Corp. (SYMC) $24.84 +2.35% Nasdaq 100 - Fallers Expedia Inc. (EXPE) $51.67 -0.92% Texas Instruments Inc (TXN) $39.93 -0.72% Google Inc. (GOOG) $872.35 -0.43% Wynn Resorts Ltd. (WYNN) $160.18 -0.30% Microchip Technology Inc. (MCHP) $39.39 -0.28% Vodafone Group Plc ADS (VOD) $35.46 -0.23% Green Mountain Coffee Roasters Inc. (GMCR) $75.71 -0.18% Sba Communications Corp. (SBAC) $77.51 -0.17% Apple Inc. (AAPL) $483.03 -0.08% Staples Inc. (SPLS) $14.80 -0.07%

Newspaper Round Up

Monday newspaper round-up: Royal Mail, RBS, Jaywings Institutional investors are preparing to take the lion's share of the biggest government flotation in 20 years as Royal Mail stocks go on sale at what critics say is a substantial discount to their real value. Analysts expect many small investors to miss out as senior Labour figures claimed the Government was "ripping off" the taxpayer by selling the stocks prematurely. Vince Cable was accused of rushing through the flotation of the service, preventing both a proper review of the prospectus of the public offering and a debate on whether the business is being sold too cheaply, writes The Times. George Osborne, the Chancellor, sought clearance in July from the European Union (EU)for the split-up of Royal Bank of Scotland (RBS), which is 83% owned by the taxpayer, allowing the Government to avoid newly-introduced rules on state support for banks. The early notification to Brussels, which came just before stricter new rules on executive pay and share ownership came into force, would make it easier to split RBS into a so-called "good bank" and "bad bank" should the Treasury decide to do so. Mr Osborne has ordered a review into whether splitting the bank would boost lending, and the application to Brussels is understood not to prejudge this process, The Daily Telegraph writes. US Treasury Secretary Jacob Lew has issued a categorical warning that the United States will default on its $16.7trn debt and throw the world into turmoil unless Congress agrees to raise the legal debt ceiling by October 17th. "Congress is playing with fire. If the US government, for the first time in its history, chooses not to pay its bills on time, we will be in default," said Mr Lew. "Anyone who thinks that the United States government not paying its bills is anything less than default hasn't thought about it very clearly," he told NBC's Meet the Press, The Daily Telegraph says. The International Monetary Fund has told Turkey to tighten policy without delay to control a ballooning trade deficit, warning that the country is a prime candidate for capital flight as the US Federal Reserve starts to withdraw global liquidity. "The authorities' immediate priority should be to reduce imbalances," said the Fund in an unusually blunt report, criticising the Islamist government of RecepTayyip Erdogan for sailing dangerously close to the wind, according to The Daily Telegraph. Venture capital group Scottish Equity Partners (SEP) has backed a management buyout at Tryzens, a technology outfit that helps customers including Ann Summers, John Lewis and Tesco to sell their goods online. Tryzens' managers are buying the business from Aim-quoted parent company Jaywings, The Scotsman reports. Interest rates on the second phase of the Government's Help To Buy mortgage scheme could be as high as 6%, according to bankers working on the project – well above the best deals already available in the mortgage market. The high rate may dampen enthusiasm for the Chancellor's flagship housing scheme, but is also likely to reduce fears that the scheme will fuel a housing bubble, The Daily Mail says. Ministers are under renewed pressure to scrap their controversial green "carbon tax" after delays in European Union state aid left British heavy industry without promised protection from the costs of the levy. Tata Steel and BASF have warned that the so-called carbon price floor — levied on fossil fuels used in power generation — is putting them at a competitive disadvantage. The Government promised that energy-intensive industries would be offered a £100m compensation package to protect them from the unilateral tax, which was introduced last April, The Daily Telegraph explains.